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MAKING SENSE OF WHAT COMES NEXT

Next Things First focuses on aspects of the health care system’s "death by a thousand cuts," highlighting the innovators who are bringing solutions to the market and analyzing the challenges these entrepreneurs face in growing their businesses.

Amazing what does not change in a year’s time… this post, originally posted to the Health Value Blog a year ago, is still as relevant as it was then. Perhaps even more important now – since the Dartmouth Atlas (and its use by Atul Gawande in his now famous New Yorker piece) influenced much of the health reform debate.

The HVBlog pulled this post – and I am very pleased that the authors have given us permission to reprint it here…

Lost in D.C. with The Dartmouth Atlas

by Hal Andrews & John Morrow

We know some of the people involved in the Dartmouth Atlas Project, and we think their analysis is important. Even so, using 2005 Medicare data to inform comprehensive payment reform is inadequate.

As such, we are surprised and dismayed at how policymakers are using the findings as the map for healthcare reform in Washington, D.C. We are also frankly appalled at how The New Yorker article by Dr. Atul Gawande has seemingly become the guidepost of reform for policymakers. The reason is that the conclusions that The White House and much of Congress have drawn from The New Yorker article are, at best, suspect and, at worst, completely wrong. Reengineering 20% of the economy is a large task, in our view, and getting the facts straight is important.

So, what have we done? Instead of using an “Atlas” to analyze McAllen and El Paso, we suggest using a “GPS” to triangulate the position that hospitals played in overall excess cost and utilization. Doing so provides some critical facts that The New Yorker failed to report.

At first blush, McAllen and El Paso are quite similar:

2008 populations are within 1% (752,020 for McAllen vs. 759,868 for El Paso).

Median age of the population is similar, at 28.2 years for McAllen compared to 30.6 years for El Paso.

Per capita income for each market is depressingly low, with $12,276 for McAllen and $16,838 for El Paso (making El Paso 37% wealthier, as suggested by the physicians in McAllen).

Total hospital utilization (i.e., all-payer data) when compared to the population were similar in calendar year 2007 (the most current year that all payer data is available), with 12% hospital utilization in McAllen versus 10% hospital utilization in El Paso.

Each market has 2% workers’ compensation hospital utilization.

Per capita hospital utilization is similar, with a rate of .48 patient days per capita in El Paso compared to .53 patient days per capita for McAllen.

McAllen cost per case is 5.4% lower than El Paso, and McAllen’s average length of stay is 9.6% lower than El Paso.

Based on these similarities, McAllen is in many ways a more desirable option for hospital care.

So, what about the real differences between McAllen and El Paso?

Overall, and not just for the Medicare and Medicaid population data (which were central to the Atlas and The New Yorker perspective), McAllen’s average cost per case is$315.00 less than in El Paso, representing in total $23.6 million in incremental costs that could be saved if all of the El Paso cases had been treated in McAllen hospitals. For policymakers who are concerned about the price paid by the uninsured, the average charge per case is $7,841 more in El Paso than in McAllen.

Importantly, the “excessive” costs attributed to McAllen do not occur in McAllen, or even in Hidalgo County. A full 6% of McAllen residents left McAllen for care to other markets such as Brownsville, Houston, San Antonio, Corpus Christi and Dallas! A total of $283 million in charges migrated away from McAllen, yet those costs are attributed to the population and demographics of the beneficiaries living there. As a result, the Dartmouth Atlas analysis overestimates the costs attributed to McAllen. As a comparison, $63 million of charges out-migrated from El Paso to other Texas hospitals during the same period (the all-payer analysis does not reveal out-migration to any other states; El Paso is closer to Phoenix than Dallas).

What about the important things, like quality? The March 2009 release of the Hospital Value Index™ reports McAllen’s average index score at 42.76 with El Paso’s being 43.83, just over one basis point difference. This indicates that the markets are nominally different on quality, core process measures, mortality, patient safety and patient satisfaction and experience. Shorter lengths of stay, lower costs, and lower mark-ups for charges on patient bills make for a more desirable profile of McAllen hospitals than El Paso.

In summary, the most current all-payer data (2007) simply does not support The New Yorker piece, which was partially based on 2005 Medicare data from The Dartmouth Atlas. For both McAllen and El Paso, the cost per beneficiary would decrease if the beneficiaries did not leave the market.

These markets have a great deal in common, but critical differences not discussed in The New Yorker. We are reminded how important it is to “follow the money”, yet without the anecdotes about what is going on in McAllen, the empirical data report that the hospitals in McAllen aren’t the problem.

We think that there are several important questions that arise:

Could an entire industry be led astray by the miscalculations of Medicare spending delivered by a half dozen hospitals in McAllen and El Paso?

Should policymakers draft legislation to reform the provision and coverage of healthcare based solely on (old) Medicare data?

Is the nation going to allow a handful of well-meaning, but uninformed, policy-makers to reform healthcare based on the view of an article in The New Yorker?

There is no way to hide it, Next Things First took a nap that lasted a little too long. While we were dozing, the world as we knew it changed – wasn’t health reform dead in the water this time last year?

We will try to pick things up as if nothing ever happened…. except for the health plans running for the hills, the providers all scrambling to become ACOs and HCA going public (again). At least some things never change.

… the WSJ’s Laura Landro today details how the government already has invested billions of dollars over two decades to develop a software for a records system that’s available free for any hospital that wants to use it. [WSJ Health Blog]

“We’re not producing enough primary care physicians,” Mr. Obama said at one forum. “The costs of medical education are so high that people feel that they’ve got to specialize.” New doctors typically owe more than $140,000 in loans when they graduate. [New York Times]

More than one in five American adults is reporting that they have a disability, a number that has increased by 3.4 million between 1999 and 2005… [HealthLeaders Media]

…employees who smoked got as much as $750 spread over a year if they quit. Nearly 15% did after a year, compared with 5% of those who didn’t get incentives. [Wall Street Journal]

Over the 35+ years since, Steve and Sherry have been photographed on more than 127 different tandem bikes and used in advertising for more than 1,400 hospitals and health systems. [Weekly Probe]

In light of all the distraction recently generated by discussions of health care IT (and even, cue the smoke machines, Health 2.0), I was very pleased to find Senator Tom Coburn, MD, and Regina Herzlinger’s piece in the Huffington Post.

In a week that for many of us has been dominated by reading the “wouldn’t-it-be-cool-ifs” of messenger bag-carrying technology evangelists, it was refreshing to see a call for a much needed national debate around the *real issues* facing the health care system.

With little fanfare, Congressional leaders may be near to agreeing on the most sweeping expansion of government in a generation – the de-facto takeover of the health insurance market by the government. Congressional Democrats are already icing the champagne. When the President’s “Medicare for all” plan is coupled with the budget, which contains a “down payment” of $634 billion over the next decade for health care, government-run health care may be inevitable.

All sides in this debate acknowledge that the U.S. has long needed easier access to health insurance. This need has gained urgency for the many Americans who are fearful of losing their employer-sponsored insurance in the midst of a recession. Unfortunately, the President’s plan will not only endanger the U.S. economy, but millions of patients as well.

They make clear that the issue here is cost containment. Or, perhaps better, that solving the “access” issue without controlling costs may be politically expedient but is a recipe for disaster.

The fundamental problem is that the President and congressional leaders lack realistic plans to control the health care costs that are already crippling U.S. global competitiveness. As a percentage of GDP, our businesses spend roughly 70 percent more on health care than competitors in other developed nations, yet we hardly receive 70 percent more in real value.

We talk a lot about cost containment – and in the world of health care venture capital, some of the most exciting investment opportunities address just this set of issues. But translating these decidedly market-focused ideas into terms that are politically palatable is difficult. Denying reimbursement for treatments, no matter their relative value or efficacy, has interest groups rushing to mount the barricades. However, as Coburn and Herzlinger point out, there is a risk of even greater hazard if we don’t engage the cost containment challenge now:

In the end, the Democrats’ health care reform will require drastic rationing… Consider Canadian patients, who may wait a year or longer to get radiation therapy. Or ask one of the nearly 1.8 million Britons who are waiting to get into a hospital or have an outpatient procedure. Or talk to the German breast cancer patients who are 52 percent more likely to die from the disease than Americans.

Concerns about rationing and patient outcomes are not demagoguery. How else can a government control costs in the real world? Many experts, including the Congressional Budget Office, dismiss as wishful thinking the Democrats’ claims of achieving efficiencies through bureaucrats’ dazzling implementation of information technology and other technocratic tools.

And this is where the real world collides with the health care technology bandwagon. It goes without saying that health care lags behind in the implementation of back office and administrative information technology. And certainly this is due in some part to all the factors that are debated regularly in the blogosphere. However, it is also due to the basic fact that there has been little ROI for physicians implementing these technologies.

I worry that we are just further confusing the issue. As my colleague Alan Buffington points out:

Isn’t it interesting that no matter how many times they are corrected, politicians and media folk refuse to distinguish between health care and health insurance. Failing to make this distinction is what causes the problems discussed in the article.

If you watch the blogs, Twitter or CNN, you will have proof that the problem Alan points out is deep and widespread. The problem with health care is that it is “hard” – complex, path dependent, interlocking, huge, with substantial ethical and moral considerations. For most people (especially politicians), this is way too much.

So, while it has taken all of our collective restraint to remain silent about the growing fury and froth in the Health 2.0 “space,” we have to point our readers to John Chilmark’s spot-on critique of the Health 2.0 Conference and the fast-bubbling brouhaha in Chilmark’s comments section. Click here to watch as a reasonable debate takes a turn for the nasty.

Full disclosure: We didn’t attend the Health 2.0 conference – but thanks to Twitter I feel like I lived through it five times over. Of course, by all accounts, there were some very interesting things to come out of the event. But for those outside the echo chamber, it is difficult to identify the value amidst the hype. Hence, I appreciated Chilmark’s comments and believe that the challenge is to bake the features and functions of Health 2.0 into the reality of the practice of medicine and the health care delivery system.